Sentiment Data

Markets are driven by people, and people swing between greed and fear. Sentiment data tries to measure that mood: how bullish or bearish investors are, how they are positioned and how much protection they are buying. Sentiment indicators are most often used as contrarian signals, on the idea that when nearly everyone is bullish, there are few buyers left, and when nearly everyone is fearful, much of the selling may be done. They are useful context but poor timing tools on their own.

Types of sentiment data#

Survey indicators#

The American Association of Individual Investors (AAII) asks members weekly whether they are bullish, bearish or neutral on stocks over the next six months. Its long run average bullish share has been around 37% to 38%. Extremes, such as bullish readings above 50% or bearish readings above 50%, have sometimes coincided with turning points.

Bank of America's Global Fund Manager Survey tracks professional investors' cash levels and positioning; very high cash levels have often been read as a contrarian bullish signal.

Positioning data#

Options based sentiment#

• Put call ratio: high ratios signal fear or hedging. See Options Open Interest Analysis.
• VIX: high readings signal fear; very low readings signal complacency. See The VIX.
• Skew: the cost of downside protection relative to upside. See Volatility Smile and Skew.

Crypto sentiment#

Using sentiment well#

1. Focus on extremes, not small changes.
2. Combine with price: contrarian signals work better when price starts confirming a turn. See Market Structure Basics.
3. Use as risk context: crowded trades are vulnerable to sharp reversals.
4. Mind the horizon: sentiment can stay extreme for long periods in strong trends.
5. Test before relying on it: many sentiment signals have weak predictive power on their own. See Backtesting Methodology.

Limits#

• Survey samples may not represent the whole market.
• Data delays: CFTC data is collected on Tuesdays and released on Fridays.
• Structural changes: options volume growth (including 0DTE) has changed put call ratio behaviour.
• Extremes can get more extreme before reversing.

Frequently asked questions#

What is sentiment data?#

Information that measures investor mood and positioning, such as surveys, futures positioning, options activity and social media tone.

Why are sentiment indicators used as contrarian signals?#

Because when sentiment is extremely one sided, most investors may already be positioned that way, leaving the market vulnerable to a reversal.

What are examples of sentiment indicators?#

The AAII survey, CFTC Commitments of Traders, put call ratio, VIX, short interest, fund flows and crypto funding rates.

Next, learn what counts as alternative data in Alternative Data Explained.